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An Update on USDC and Silicon Valley Bank

circle.com

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Re: An Update on USDC and Silicon Valley Bank

#51

Post by charcircuit »

tempsy wrote: post #42
obblekk wrote: post #6

23% of the reserve, or $9.7B is held in cash. I think on Thursday, SVB saw cash outflow requests over $40b in one day. USDC peg is so far below 1 right now there will definitely be a lot of par arbitrage Monday trying to withdraw. Hopefully it doesn’t take longer than a day for them to settle treasury trades, and maybe some people have lost the keys to their crypto. They could also possibly have a line of credit with…

how is it “so far below” it’s recovered to less than a 4% discount

There is no fee to covert USDC to USD. So as long as you buying USDC and depositing it into Circle is less than $1 per USDC you make profit. As long as you make profit it makes sense to arbitrage as much as you can.

Re: An Update on USDC and Silicon Valley Bank

#52

Post by tempsy »

charcircuit wrote: post #51
tempsy wrote: post #42

Earlier quoted context omitted.

how is it “so far below” it’s recovered to less than a 4% discount

There is no fee to covert USDC to USD. So as long as you buying USDC and depositing it into Circle is less than $1 per USDC you make profit. As long as you make profit it makes sense to arbitrage as much as you can.

that’s if you have a Circle account which effectively no individual has access to. if you convert USDC to USD on Coinbase or another exchange you’re paying the market rate

Re: An Update on USDC and Silicon Valley Bank

#53

Post by yieldcrv »

Anybody arbing this with their MEV bots?

A couple MEV trackers on twitter are showing people making a shit ton of money through various onchain protocols goofing.

(this has nothing to do with the USDC redemption mechanism, nobody is doing that while banks are closed and Coinbase is disabled)

Re: An Update on USDC and Silicon Valley Bank

#54

Post by charcircuit »

tempsy wrote: post #52
charcircuit wrote: post #51

Earlier quoted context omitted.

There is no fee to covert USDC to USD. So as long as you buying USDC and depositing it into Circle is less than $1 per USDC you make profit. As long as you make profit it makes sense to arbitrage as much as you can.

that’s if you have a Circle account which effectively no individual has access to. if you convert USDC to USD on Coinbase or another exchange you’re paying the market rate

The arbitrage the comment was talking about would be done by people with Circle accounts. If you don't have an account it would be in your interest to sell your USDC for as close to $1 possible. This will inflate the value of USDC on the open market until Circle account holders start to fear that they will be holding the bag.

Re: An Update on USDC and Silicon Valley Bank

#56

Post by braingenious »

I’m not very knowledgeable on this topic, so I have a legit question about all of this:

How is pausing withdrawals not blatant currency manipulation? If I had USDC and lost all faith in it yesterday, shouldn’t I be allowed to cash out today?

Also, if they’ve got many billions in cash, why would losing access to a sliver of it justify shutting down withdrawals?

“Trust us, it’s worth a dollar! Or don’t trust us! It doesn’t matter because you don’t have any choice but to hold USDC until we deem it advantageous to us to allow you to exchange them for real money!”

Re: An Update on USDC and Silicon Valley Bank

#57

Post by z3c0 »

bhaak wrote: post #11
tekla wrote: post #5

What they don't bring up. The peg is a lie, hit $0.87. https://www.cnbc.com/2023/03/11/stablecoin-usdc-breaks-dolla...

The peg is held up by the belief that you can always get 1 USD for 1 USDC. Obviously the market had some doubts about this today and then liquidity issues drove the price down. I'm somewhat surprised that it climbed back up this fast which means that the panic seems to be over (for the moment).

I guess this was one of those "be greedy when everyone is being fearful" moments. An easy ~10% return.

Re: An Update on USDC and Silicon Valley Bank

#58

Post by oldgradstudent »

benatkin wrote: post #31
oldgradstudent wrote: post #20

Earlier quoted context omitted.

The insurance is negligible for them.

Hence the government protection should be partial. Mostly just making sure SVB's assets are used to lessen the impact of the closure. If that results in Circle getting pennies on the dollar then so be it.

> Mostly just making sure SVB's assets are used to lessen the impact of the closure

That's standard practice.

Money from liquidation goes first to insured deposits, then what remains goes to uninsured deposits, then to pay other debts, and finally if anything is left, to shareholders.

Looks like here it will only cover insured deposits and substantial fraction of uninsured deposits.

Re: An Update on USDC and Silicon Valley Bank

#59

Post by capableweb »

braingenious wrote: post #56

I’m not very knowledgeable on this topic, so I have a legit question about all of this: How is pausing withdrawals not blatant currency manipulation? If I had USDC and lost all faith in it yesterday, shouldn’t I be allowed to cash out today? Also, if they’ve got many billions in cash, why would losing access to a sliver of it justify shutting down withdrawals? “Trust us, it’s worth a dollar! Or don’t trust us! It doe…

Imagine that you use a currency made by a specific company, lets say it's called PaypalCoin. Part of the value of the currency is that the company manages it, part of the risk is that a company manages it. So you'll only be able to exchange it for X as long as Paypal say you can exchange it for X. This is part of what PaypalCoin is, so if you use it, you should be aware of this.

This is basically what USDC is, and Circle is the organization that controls it. It is not a decentralized currency, it's a centralized digital currency. If Circle blacklists you and your funds, you won't be able to trade it for USD in the traditional exchanges, you'd only be able to do it P2P. This has happened already, with Tornado Cash, so it has precedent, not something I'm making up.

> USDC is issued and redeemed in accordance with Centre policies including the Centre Blacklisting Policy. Centre reserves the right to block the transfer of USDC to and from an address on chain as permitted under the Centre Blacklisting Policy.

https://www.circle.com/en/legal/usdc-terms & https://www.centre.io/hubfs/PDF/Centre_Blacklisting_Policy_2...

If Circle says you cannot exchange your USDC for USD, then that's the rule. If you don't want that possibility, you wouldn't use USDC in the first place.

Re: An Update on USDC and Silicon Valley Bank

#60

Post by tempsy »

charcircuit wrote: post #54
tempsy wrote: post #52

Earlier quoted context omitted.

that’s if you have a Circle account which effectively no individual has access to. if you convert USDC to USD on Coinbase or another exchange you’re paying the market rate

The arbitrage the comment was talking about would be done by people with Circle accounts. If you don't have an account it would be in your interest to sell your USDC for as close to $1 possible. This will inflate the value of USDC on the open market until Circle account holders start to fear that they will be holding the bag.

if major usdc holders who have a circle account were primarily concerned with tiny arbitrage plays they wouldn’t be holding a stablecoin earning zero yield when t-bills pay 5% to begin with
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